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Younger workers dropping the ball on retirement savings

They're not off to a good start. Young workers between 18 and 30 are at risk for failing to save enough for retirement.

Fewer participate in a 401(k) plan, and when they do, they don't set much aside out of their paychecks. Also, younger workers tend to liquidate their accounts when they leave a job at a much higher rate.

These are critical missteps because this age group is more reliant on retirement savings than past generations. Although their parents may have had a traditional pension, very few among this age group are likely to have similar benefits.

"For this younger generation saving for their future is so critical," said Pam Hess, director of retirement research for human resources consultant Aon Hewitt. "But retirement seems such a long way off and their behavior doesn't reflect that need."

All this is likely to leave 80 percent of young workers short of money at retirement, Aon Hewitt says.

Here's a look at some reasons why workers, especially young ones, need to take control of their retirement future.

* Experts say young workers need 18.7 times their final pay saved at retirement. This includes Social Security, retirement accounts and their personal savings to maintain their standard of living in retirement. That means individuals making $50,000 when they retire need to have $935,000.

Since Social Security currently replaces about 40 percent of income, workers need more than $560,000 saved in a 401(k) or other accounts. Yet, just half of the workers between 18 and 30 participate in a 401(k) plan at work.

* Young workers who contribute to a 401(k) set aside just 5.3 percent of their paycheck, although experts say 10 to 15 percent is needed to be prepared. About 41 percent of young workers do not save enough to get their full employer match.

* Perhaps most alarming is that nearly 60 percent of young workers cash out their 401(k) when changing jobs. Often the balance is just a few thousand dollars, but it's an amount that could have turned into tens of thousands of dollars at retirement.

For some ideas on getting on track with retirement savings or other financial matters, young people should check out these Web sites: www.genxfinance.com, www.genywealth.com and www.youngmoney.com.